A Critical Analysis of the Potential Recession in the United States - Essay Example

One of the major factors that has spun a downturn for the US is the weakening of the housing market which caused consumers to diminish their overall spending. The housing boom of the last decade was partly createddebt-to-equitachievement by the ability of American citizens to obtain very cheap financing which allowed the people to gain equity and have the debt-to-equit confidence to continue to spend.

The money was readily available for financing purposes because a large number of nation internationally were saving a lot of money and plenty of dollars that came from international trade, while the American citizen was spending money madly. The typical American citizen six to eight years ago had a  ratio of one to one, now this number has shifted to ratio of close to 1 to 0.72 to implying thpersonalthe second-highest achieve have personal debt is much higher the equity. When people’s credit is capped out no more money can come into the economy in the form of loans since the citizens do not qualify for additional credit.

Another major factor in which the international community is affecting the US economy is the job market. Many multinational firms are staying away from the United States as a potential investment location due to the higher cost of labor in the United States. There are new emerging economies competing for the new jobs of the knowledge economy of our century that provide competitive advantages to the US labor costs. One of these economies is India which has the second-highestachieve  population in the world.

India is using an economic model based on exporting services for the lucrative IT industry. The Chinese economy has become the dominant manufacturing-based economy in the world which hopes that the United States does not fall into a recession since America represents one of its largest trading partners. The effect of globalization effect influenced the unemployment rate of the US economy a rate of above 5% (Colvin). The US economy is simply not generating the new jobs it once did and things are bound to get worse.

A variety of factors hurt the US economy during the last six years which include the War on Iraq, multiple natural tragedies such as Hurricane Katrina, the rise of new world players, overspending by American consumers, and the demise of the housing market among others. The United States has to get back to its roots and make economic adjustments by reducing governmental spending, creating better incentive packages for investors, shifting away from a petroleum-dependent, economy, investing in its research and development and reducing its corporate and personal tax rates.

The job of turning the US economy will not be easy. The current political energy in the US is inkling toward a change of administration towards a Democratic government. The last democratic president, Bill Clinton, helped the country achieveat  one of its best economic growth outcomes in US history. There is a lot of work ahead for the US to get back towards continuing its economic success of the past, but in the land of opportunity, hard work and the Americanhave spirit have always prevailed.